Please help - Partner property tax situation very unclear?

[dominicwoolnough]

Hello,

I'm really hoping someone can help my Partner and I with our property tax situation.
To give you a better picture my partner and her 3 children live with me in my house which still has a £95k mortgage on it costing approximately £650 a month. We are seen as a full couple in relation to child tax credits etc. where my income means that she cannot claim any because I am a 40% tax payer - just. She has also forfeited the working tax credits she used to receive because of our joint income.
My partner owns her house outright and has rented it out since April 2009, when she moved into my house. She has a 16 hour a week job that pays enough for her to be taxed (i.e. beyond personal allowance threshold) and receives £625 gross rent too which she has to pay 20% tax on, less maintenance costs and other tax deductable items.
Recently someone mentioned to us that she had been paying too much tax over the last 28 months because she hadn't taken into account the costs of the mortgage that our relatinoship was paying to ensure that we all had a roof over our heads.
Please can anyone explain how, if possible, the costs or interest of my mortgage can be used to offset against the tax paid on the rented property?
It was mentioned that she may have to be officially part owner of my house or even take on half the debt but surely when every other tax office sees us as a joint entity why can't this part of the tax office see it too without the need for adding names to mortgages or title deeds.

Thanks in advance,
Dominic

[section 44]

Your partner would only be entitled to a tax deduction for interest payments if the loan was for the purpose of acquiring (or refinancing) the house that she lets. This isn't the case and therefore the interest is not deductible.

Neither you becoming a co-owner of the house that she owns, nor her becoming a joint borrower in respect of your mortgage, will help. This is because the mortgage that you took out was for the purpose of acquiring your home and therefore the interest is not deductible.

[dominicwoolnough]

Thanks for your speedy reply.